Erdogan Plans to Tighten His Grip on Turkey’s Economy

Turkish President Recep Tayyip Erdogan said he intends to tighten his grip on the economy and take more responsibility for monetary policy if he wins an election next month.

With the Turkish lira at a record low against the dollar and down this year against all 17 major currencies tracked by Bloomberg, Erdogan told Bloomberg TV in London on Monday that after the vote transforms Turkey into a full presidential system, he expects the central bank will have to heed his calls for lower interest rates. The central bank’s key rate is now 13.5 percent, compared with 10.9 percent consumer-price inflation.

“When the people fall into difficulties because of monetary policies, who are they going to hold accountable?” the 64-year-old president said in the interview. “They’ll hold the president accountable. Since they’ll ask the president about it, we have to give off the image of a president who’s influential on monetary policies.”

That “may make some uncomfortable,” he said. “But we have to do it. Because it’s those who rule the state who are accountable to the citizens.”

Erdogan on Monetary Policy, Parliamentary Elections

The lira slid to its weakest level ever against the dollar after his remarks were published, losing 0.6 percent to 4.3942 at 7:32 a.m. Istanbul time.

Erdogan last month called snap elections for June 24, when a victory would consolidate his one-man rule of a country he’s governed since 2003. Since defeating a coup attempt in 2016, Erdogan has used emergency rule to increase his control over the region’s largest economy. A referendum last year weakened the role of parliament and gave the president sweeping authority in the most radical constitutional overhaul since the republic was founded 95 years ago.

“From the moment we move to a presidential governing system, our effectiveness there will be very different,” he said. “We’re going to do this so we can be held accountable for the responsibility we’ve taken.”

Recep Tayyip Erdogan

Photographer: Jason Alden/Bloomberg

The one-time Islamist firebrand, who was jailed on charges of inciting hatred in 1999, was in London meeting with executives, bankers and investors amid a sense of mounting crisis in Turkey’s economy. He’ll meet U.K. Prime Minister Theresa May and Queen Elizabeth II later on Tuesday.

The outreach comes as Turkey’s relations with its NATO allies fray and its diplomatic focus shifts toward Russia and Iran. The country faces the unprecedented risk of sanctions from the U.S., a risk that Erdogan downplayed.

“We can’t cut off our ties with Russia,” he said in response to whether he was prepared for U.S. sanctions should he consummate the purchase of a missile defense system from Vladimir Putin’s government. “If we’re allies with the U.S., we need solidarity, not sanctions.”

The rapidity of the changes to Turkey’s economic and foreign policies has shaken investor confidence, which is critical because Turkey’s current-account deficit demands steady inflows from abroad. The shortfall in the first quarter of this year was more than $16 billion, almost double the same period last year.

Erdogan has routinely criticized the central bank for setting interest rates that he says have helped stoke rising prices, an argument that contradicts conventional economic theory. Central bank governor Murat Cetinkaya has said higher borrowing costs would help anchor the currency, a view in line with orthodoxy.

Elaborating on his view of interest rates, Erdogan said that cutting them would bring lower inflation because borrowing costs would decline.

“Of course our central bank is independent,” Erdogan said. “But the central bank can’t take this independence and set aside the signals given by the president, who’s the head of the executive. It will make its evaluations according to this, take its steps according to this. And I believe this will result in very beneficial steps in the future.”

On other topics discussed in the interview:

Regarding the violence in Gaza:“There are two people responsible: Mr. Trump and Netanyahu.”

Regarding a U.S. court ruling against a banker from Turkiye Halk Bankasi AS for trying to evade U.S. sanctions against Iran:“Right now a great injustice is being done against Halkbank… Such an injustice can’t be… I can’t know what result is going to come from this… I hope it doesn’t yield a result that will completely destroy Turkish-U.S. relations.”“Hakan Atilla is definitely innocent. So we want his acquittal… If Hakan Atilla is going to be declared a criminal, that would be almost equivalent to declaring the Turkish Republic a criminal.”

Regarding the U.S. administration:“We haven’t had a problem up to now. But that doesn’t mean there aren’t areas where our thoughts don’t align, there are.”